Gold a rush for declining economy

July 21, 2008|By AUTUMN PAPAJOHN

TRI-STATE - Diamonds might be a girl's best friend, but gold is the bread and butter of the jewelry industry, providing fast cash for those looking to scrap it.

Tucked away in the depths of jewelry boxes are broken chains, class rings and old trinkets from boyfriends past. Such jewelry, as well as gold coins, dental gold and the like can translate to cash for those looking for some extra money.

Today, people interested in getting rid of their old jewelry have a few options. They can take their scrap gold to jewelry stores, where it can be melted for use as another item or they can take their gold jewelry to specified jewelers and pawnshops that buy back scrap gold for a retail value based on weight and gold karat value.

Such places might buy jewelry as is and sell it, or have the gold melted down and refined.

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Tom Motichka, part owner of The Jewelry Shop in Greencastle, Pa., said the popularity of gold is as simple as supply and demand. The American dollar is worth less and overseas, there is more demand for gold, especially in China and India, Motichka said.

"With the drastic rise in oil, gold tends to hedge against inflation. It's a worldwide commodity," he said.

David Ettinger, manager of Bechdel Jewelers in Inwood, W.Va., said gold has been popular for more than 5,000 years and while it's had its ups and downs, it's still around because of durability, rarity and beauty.

The amount of money a seller receives for old or broken gold varies significantly.

According to statistics from the World Gold Council, 24-karat gold is finest and is rarely used because of its softness. Twenty-four-karat gold is 99 percent pure gold; 18-karat gold is 75 percent pure; and 14-karat gold is 58.3 percent pure. Ten-karat gold is 41.7 percent gold and is the minimum gold content that can be considered "gold" jewelry in the United States.

Sellers are only given money for the percentage of pure gold in their pieces.

Once scrap gold is bought by jewelry stores and pawnshops, it must be refined. The metal is melted and a chemical process separates the gold from other metals. The extracted gold can be used to create new jewelry and make repairs.

Motichka said that because the refinement process is so expensive, stores must obtain a couple of hundred pieces before it is cost-effective.

Ettinger said that in mid-March, gold reached its value peak at more than $1,020 per troy ounce. After that, he said, the gold market fluctuated every day but got back down to $852 per troy ounce on May 1.

On Friday afternoon, gold traded at $957.30 per troy ounce on the New York Mercantile Exchange.

Graduate gemologist Laurie Rose of the Ultimate Diamond and Gold Outlet in Hagerstown said the most unique thing about gold is that it stands by itself in value because it can be molded into and used to mount anything.

She said jewelry always will be a commodity because it's pretty and makes wearers feel good.

"You have a moment of self-gratification when you wear anything with a lot of sparkle to it. Jewelry just makes you happy," Rose said.

Not all jewelry stores are willing to buy scrap gold from customers. To sell scrap gold, interested sellers have the option of turning to repair and pawnshops.

Jim Lenig, owner of Lenig's Jewelry Shop in New Oxford, Pa., said that at his store, 15 to 30 people a day want to sell him their old gold. Lenig said the average person could get $50 to $500 for their gold.

"Gold is an all-time high, I think," Lenig said. "A lot of its value comes from the fact that the world is backed in gold. People would rather hold a precious metal than a dollar bill, especially since the dollar is losing value, so gold keeps going up."

Another reason gold is popular is that it interests people of all ages.

"Gold is a constant come and go," Lenig said. "Kids buy jewelry for their girlfriends and then break up and bring it back, or new boyfriends don't want their girlfriends to have jewelry from their old boyfriends. There's always a market for buying and selling gold."